Story highlights

Independent group says damage appears to indicate flaperon came off while plane was in air

Plane debris will be sent to investigators in France on Friday, official in Paris tells CNN

Investigators confident debris found on an Indian Ocean island comes from a 777 aircraft

One group of independent observers said Thursday that the damage to the component -- a right wing flaperon -- should give authorities a good indication that the piece came off while the plane was still in the air.

The group, led by American Mobile Satellite Corp. co-founder Mike Exner, points to the small amount of damage to the front of the flaperon and the ragged horizontal tear across the back.

The rear damage could have been caused if the airliner had its flaperon down as it went into the ocean, some members of Exner's group wrote in a preliminary assessment after looking at photos and videos of the component.

But the lack of damage to the front makes it more likely the plane was in a high-speed, steep, spiral descent and the part fluttered until it broke off, the group said.

Boeing and Australian officials are confident the debris -- found Wednesday off the coast of a remote island in the west Indian Ocean -- came from a Boeing 777 -- and might be from Malaysia Airlines Flight 370, a 777 that disappeared in March 2014 with 239 people on board.

Exner's group -- an informal cadre of aviation experts -- said that if the flaperon were still on the wing when the plane hit water, the front would have been damaged by hitting the part of the wing to which it was attached. And the rear damage looks like it was caused by stress rather than being bent and broken off when the plane hit the water.

But an aircraft component specialist who spoke to CNN disagreed.

The lack of damage to the front section "tells me that the component could still have likely been back in its original position inside the wing itself," said Michael Kenney, senior vice president of Universal Asset Management, which provides plane components to airlines.

'Highly confident' component from Boeing 777

Boeing investigators are confident that debris found on a remote island in the Indian Ocean comes from a 777 aircraft, according to a source close to the investigation.

"We are highly confident but it still needs confirmation that it is a part from a 777 aircraft," he told CNN's "Erin Burnett OutFront." "The only 777 aircraft that we're aware of in the Indian Ocean that could have led to this part floating is MH370. But as I said, we still need to confirm that through closer study."

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People cleaning a beach found the debris Wednesday on Reunion, a French overseas territory in the western Indian Ocean.

The source said Boeing investigators feel confident the piece comes from a 777 because of photos that have been analyzed and a stenciled number that corresponds to a 777 component. A component number is not the same as a part number, which is generally much longer.

The search for MH370 48 photos

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Images of the debris also appear to match schematic drawings for the right wing flaperon from a Boeing 777. A flaperon helps the pilot control the aircraft. It is lightweight and has sealed chambers, making it buoyant.

Despite this confidence, no one is saying the part definitely comes from a 777, much less MH370.

Finding the debris is a "significant development" in the search for MH370, Australian Deputy Prime Minister Warren Truss said.

More debris

New debris, which washed ashore Thursday and appears to resemble remnants of a suitcase, is also part of the investigation, Reunion Island police officials confirmed to CNN.

Remembering the passengers of MH370 12 photos

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The flight vanished March 8, 2014, en route to Beijing. So far, no confirmed trace of it has been found, making it one of history's biggest aviation mysteries and leaving relatives of passengers and crew members uncertain about the fate of their loved ones.

A preliminary assessment by U.S. intelligence agencies, produced in the wake of the MH370 disaster, suggested it was likely someone in the cockpit deliberately caused the aircraft's movements before the Malaysian airliner disappeared.

Two U.S. officials briefed on the matter told CNN that the assessment, which was not intended for public release, was prepared months ago and was solely based on available satellite and other evidence.

The U.S. intelligence assessment was largely focused on the multiple course changes the aircraft made after it deviated from its scheduled Kuala Lumpur to Beijing route. Analysts determined that, absent any other evidence, it's most likely someone in the cockpit deliberately moved the aircraft to specific waypoints, crossing Indonesian territory and eventually toward the south Indian Ocean.

Malaysian investigators haven't reported finding any evidence that casts suspicion on the pilots.

The airliner's crew has been the focus of attention since the mysterious disappearance, but no proof has emerged indicating they intended to destroy the plane. Law enforcement and intelligence agencies from numerous countries examined the plane's manifest of crew and passengers and found no significant information to suggest anyone on board posed an obvious threat.

Missing plate

If it does turn out to be from Flight 370, the development would reassure Australian officials that they are looking for the rest of the plane in the right area, Truss and Dolan said.

Airplane debris found in western Indian Ocean02:27

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"It's credible that debris from MH370 could have reached the Reunion Islands by now," Truss said.

Malaysia Airlines is sending a team of investigators to Paris and a second team to Saint-Denis, Reunion, on Friday, an airline official in Kuala Lumpur, Malaysia, told CNN.

It's unclear how identification will be made.

Normally identification would be aided by a small serial number plate attached to a flaperon, but the part found on the beach appears to be missing the serial number plate, according to photographs.

Other markings may be found on the part, said Kenney, the executive from Universal Asset Management.

Australia is leading the underwater search for the remains of Flight 370 in the southern Indian Ocean, some 2,300 nautical miles (3,700 kilometers) east of Reunion. But Truss said that French and Malaysian authorities will be responsible for establishing whether the debris found off the island came from the missing jetliner.

Australia has offered its help, he said, including asking marine experts to look at photos of the debris to determine whether barnacles on it are "consistent with something that was floating in the oceans for 16 months or more."

Thursday, 30 July 2015

TIANJIN: China is confident that the conflicts at the South China Sea will not affect cooperation with Asean, says Chinese Vice Foreign Minister Liu Zhenmin.

He said China had been insisting on negotiation and consultation with the countries that also claim sovereignty in the disputed waters, and emphasising on working with Asean to uphold safety and freedom of navigation in the South China Sea.

“The challenges we are facing now are only temporary. There are broad prospects in the cooperation between China and Asean,” he said.

Liu was speaking to reporters together with Thai Foreign Ministry deputy permanent secretary Noppadon Theppitak after co-chairing the China-Asean senior officials’ meeting on the implementation of the Declaration on the Conduct of Parties in the South China Sea (DoC) here.

China and several countries in South-East Asia, including Malaysia, Brunei, the Philippines and Vietnam, assert overlapping claims on the resource-rich South China Sea.

Disputes have erupted with the claimants blaming each other for building military and civil facilities on the contested reefs.

Anti-China riots broke out in Vietnam last year when China deployed an oil rig in a section of the South China Sea claimed by both countries.

The Philippines has sought international arbitration to resolve the dispute, a move criticised by China as a betrayal to the commitment to solve the issue through dialogue and negotiations.

As tension continued to flare over the disputed waters, China has openly warned Japan and the United States against meddling in the conflicts.

On Tuesday, China carried out a live-fire drill in the South China Sea to “improve its maritime combat ability”, Chinese national news agency Xinhua reported.

Citing navy sources, Xinhua said dozens of missiles and torpedoes, as well as thousands of shells and bombs, were fired during the drill.

Expressing confidence that the conflicts in the South China Sea were “manageable”, Liu said there was no need to worry.

Without naming any countries in particular, he reminded third parties not to intervene and condemn China on the issue.

“The South China Sea is not an issue between China and Asean, but China and some countries in the grouping.

“Over the years, through the formulation of the DoC and the efforts to draw up a Code of Conduct (CoC), China and Asean have worked together to maintain peace and stability as well as to uphold freedom and safety of navigation in the South China Sea.

“China is confident and determined to work with Asean to jointly manage the issue,” he said.

Meanwhile, Noppadon said China and Asean had agreed to begin a new phase of consultations on the CoC and work towards its early conclusion.

He added that Thailand would submit a draft possible outline of the CoC for the consideration of the next joint working group, which would meet in Chengdu, Sichuan province, in October.

The meeting yesterday also witnessed the agreement to establish hotline communications between the Asean and Chinese foreign ministries to respond to emergencies at sea.

Malaysia was represented by Wisma Putra secretary-general Datuk Othman Hashim and three other officers in the meeting.

When approached, Othman said the meeting was peaceful and constructive.

“We discussed extensively on what we have achieved so far, and what has to be done for the future.

“We are working together with other Asean members for the implementation of the DoC and the development of the CoC,” he said.

Malaysia, which is the chair of Asean this year, will host a series of meetings, including the Asean Foreign Ministers’ Meeting and Asean Plus Three Foreign Ministers Meeting, from Aug 1 to 6.

Tuesday, 28 July 2015

On Thursday last week, the FBI released a film entitled The Company Man: Protecting America's Secrets, which targets economic espionage. The 35-minute film features two Chinese economic spies who try to bribe a US employee with money, attempting to acquire insulation technology from the latter's company. The two were later prosecuted and caught in the net of justice. According to media reports, the video has already been shown nearly 1,300 times at US enterprises.

An FBI official publicly voiced that "China is the most dominant threat we face from economic espionage … The Chinese government plays a significant role."

The official also declared that economic espionage has caused losses of hundreds billions of dollars annually to the US economy.

How much is "hundreds of billions of dollars?" Say $300 billion, about 2 percent of US annual GDP.

Since the FBI believes that there has been a 53 percent surge in economic espionage in the US, and 95 percent of US companies suspect that China is the main culprit, does it infer that China has stolen 2 percent of US GDP?

Some people may ponder that given the Cold War is over, Osama bin Laden and Saddam Hussein were eradicated and the war on terror is seemingly not that urgent for the moment, and in light of US federal budget constraints, the FBI needs to find new strategic reasons for more funds. Therefore, the "position" of "Chinese economic spies" has been greatly elevated.

What the FBI has done is bound to injure Sino-US relations. But it is US society that will suffer the most. Many Americans will hence think that their economy is fine, their companies have no problems at all and the only issue is the threat from Chinese economic espionage.

It looks to them like Chinese intelligence services and civilian business spies are much more powerful than the FBI, CIA and other non-governmental intelligence forces combined. China is not capable in every category except for spy technology. This is the logic of the FBI.

If we take a good look at China's overall development in this changing world, you will see that one-third of global new technical patents are now created by Chinese companies every year. Innovation has also become China's national slogan. China will eventually be able to challenge the West's dominance in high technology.

China is well aware that it should learn from the West, especially the US, in terms of technology. But this is not stealing.

US universities are also attracting students from all over the world, yet this brings more benefits than losses to the nation due to the dissemination of knowledge.

Someone who always claims that his house was robbed and feels free to suspect his friend or neighbor is the thief is very annoying, and that is what the US is doing right now. The whole world knows that US intelligent agencies are the most notorious regarding this issue.

We hope that the often-silent Chinese intelligence services could expose some hard evidence of espionage by US spies, and make a spy movie featuring US espionage, providing it with a mirror to look at itself.- Global Times

Not a good idea to spy on friends

THERE's been so much dramatic news these days – from Greece's miseries to Iran, China from blowhard Donald Trump – that the shocking story of how America's National Security Agency has been spying on German and French leadership has gone almost unnoticed.

Last year, it was revealed that the NSA had intercepted Chancellor Angela Merkel's cell phone. She is supposed to be one of Washington's most important allies and the key power in Europe. There was quiet outrage in always subservient Germany, but no serious punitive action.

Brazil's president, Dilma Rousseff, was also bugged by American intelligence. Her predecessor, Luiz Lula da Silva, was also apparently bugged.

This year, came revelations that NSA and perhaps CIA had tapped the phones of France's president, Francois Hollande, and his two predecessors, Nicholas Sarkozy and Jacques Chirac. Hollande ate humble pie and could only summon some faint peeps of protest to Washington. Luckily for the US, Charles de Gaulle was not around. After the US tried to strong-arm France, "le Grand Charles" kicked the US and Nato out of France.

Last week, WikiLeaks revealed that the NSA had bugged the phone of Germany's foreign minister, Frank-Walter Steinmeier, for over a decade. Imagine the uproar and cries "the Gestapo is back" if it were revealed that German intelligence had bugged the phones of President Barack Obama or Secretary of State John Kerry.

A lot of Germans were really angry that their nation was being treated by the Americans as a northern banana republic. Many recalled that in the bad old days of East Germany its intelligence agency, Stasi, monitored everyone's communications under the direct supervision of KGB big brother at Moscow Centre.

The National Security Agency and CIA claim their electronic spying is only aimed at thwarting attacks by anti-American groups (aka "terrorism"). This claim, as shown by recent events, is untrue. One supposes the rational must be a twist on the old adage "keep your enemies close, but your friends even closer".

Why would the US risk alienating and humiliating some of its closet allies?

One suspects the reason is sheer arrogance … and because US intelligence could do it. But must US intelligence really know what Mr Merkel is making Mrs Merkel for dinner?

Until WikiLeaks blew the whistle, some European leaders may have known they were being spied upon but chose to close their eyes and avoid making an issue. Raising a fuss would have forced them to take action against the mighty US.

Besides, British, Italian and French intelligence are widely believed to have bugged most communications since the 1950's. But not, of course, the White House or Pentagon. The only nation believed to have gotten away with bugging the White House was Israel during the Clinton years. The Pentagon was bugged by a number of foreign nations, including Israel, China and Russia.

Humiliating Europe's leaders in this fashion is a gift to the growing numbers of Europeans who believe their nations are being treated by the US as vassal states.

There is widespread belief in Western Europe that US strategic policy aims at preventing deeper integration of the EU and thwarting a common foreign policy or a powerful European military. Britain serves as a Trojan horse for America's strategic interests in Europe.

Way back in the 1960's, then German defence minister Franz Josef Strauss, an ardent proponent of a truly united Europe, thundered that Europeans would not play spearmen to America's atomic knights. But, of course, that's just what happened.

The US still runs and finances Nato in the same way the Soviet Union commanded the Warsaw Pact. Washington calls on Europe for troop contingents in its Middle East and south Asian colonial wars in the same way that the Persian Empire summoned its vassals to war.

Many Germans and French, both right and left, would like their leaders to react more forcefully to NSA's ham-handed spying. However, Merkel and Hollande are both political jellyfish eager to evade any confrontation with Big Brother in Washington. Maybe he has too much dirt on them.

But a confrontation is inevitable one day if Europe is to regain its true independence that was lost after World War II.

By Eric S. Margolis who is an award-winning, internationally syndicated columnist. Comments: letters@thesundaily.com

Giving an example, she says developers should plan townships for senior citizens to grow old within the community “like one big family”.

She says local councils also play a very important role in ensuring that the roads and buildings are accessible to the elderly.

To encourage collaborations between the NGOs, the Government gives incentives to corporations to run corporate social responsibility projects, she says.

She says individuals have to plan for old age by keeping healthy and active and saving for their future needs.

On plans to build more homes to accommodate the growing number of seniors, she says the ministry hopes to de-institutionalise homes because a family environment is always better.

However, legislation forcing grown children to care for their parents, is “not the way”, she stressed.

She says cultivating values like filial piety by stressing on the importance of family bonds through education, is preferable.

“We have nine (registered) old folks homes nationwide with a total of 1,590 residents.

“And, there are an additional two homes housing more than 200 bedridden residents, 70% of whom are above age 60.

“If we accept residents too easily, some will just send them to us because it’s convenient,” she says, adding that five activity centres for seniors will be built in addition to the existing 45 nationwide. The number will be increased steadily.

She says ‘caring complexes’ housing both seniors and orphans are in the pipeline.

“The idea is for kids to cheer up the seniors while learning from their elders,” she says.

She says better health services have led to Malaysians living longer with couples now having to care for their children, parents and grandparents.

Acknowledging that it’s a huge financial burden, she says the ministry is trying to educate young couples on how to better plan for their family.

Explaining that family planning isn’t just about birth control, she says it entails managing family finances.

“We’re not asking couples to give birth blindly but if you can afford to, you should have more children,” she says.

On June 14, Sunday Star front paged how urban parents can expect to pay as much as the combined price of a luxury car and a semi-detached house to raise a child up to degree level. The report followed a remark by Women, Family and Community Development Minister Datuk Seri Rohani Abdul Karim urging Malaysians to have more kids to address the projected shrinking population.

National Council of Senior Citizens Organisations Malaysia president Datuk Dr Soon Ting Kueh is “very disappointed” that the country’s seniors were left out of both the 10th and 11th Malaysia Plan, lamenting that the elderly are a neglected lot.

“There is no social security for the old,” he points out.

Calling for a national forum to be held fast, he cautions that the country may reach aged nation status even before 2030.

“Everyone will grow old. The only question is when.

“We must tackle these challenges together but the Government has to spearhead the solution with a detailed development plan.”

While supportive of the Government’s call for couples to have more kids, he feels that it won’t solve the problem.

Suggesting a private pension fund be set up, he says it will ease the financial burden on families caring for their old parents while giving the seniors a sense of independence.

Seniors who are poor and without family must be cared for by the Government, he insists.

“There aren’t enough government old folk homes nationwide,” he says.

“We need at least 90 but we don’t even have one per state.”

Those who can afford private nursing homes are also suffering, he says.

He estimates there are some 4,000 private centres nationwide but only slightly more than 200 are regulated.

“Some pay between RM500 and RM600 to live in very poor conditions where seniors are hosed down instead of getting a proper bath.

“These unlicensed homes are stinky and the living conditions very undignified,” he says.

He feels that country’s healthcare system also needs to be improved.

“The waiting time is too long and there are not many geriatric doctors.

“The seniors will be dead by the time they get treatment,” he says, only half-in-jest.

But, he stresses, the seniors themselves must grow old with dignity by keeping active.

The interior designer is working to come up with building guidelines. Some problems in current housing include the lack of bathrooms on the ground floor, switches that are too high up and poor lighting, she says.

“We have rooms for maids but not for old parents?,”she says adding that aged-friendly homes must be made mandatory.

Universiti Sains Malaysia (School of Social Sciences) associate professor Dr Saidatulakmal Mohd notes that while some supermarkets and shopping centres have started becoming aged-friendly, none of the new housing developments are.It’s worse when residential houses are converted into nursing homes for the elderly as it has been proven to be non-conducive to their wellbeing.

“We don’t need to wait until Malaysia becomes an aged society. Many of the elderly are already being abandoned and abused, she says.

“While it’s easy to point to the Government for a solution, it’s important to note that welfare aid for seniors has risen over the years.”

To cover rising public healthcare costs, she anticipates higher taxes for the future generation.

But unlike their parents, youngsters today don’t expect their children to care for them in their old age.

“This is because they are facing financial hardship providing for their family while supporting their aged parents and don’t want their children to go through the same thing,” she explains.

She calls on the Ministry of Women, Family and Community to bring back the ‘elderly in the community’ initiative to promote active ageing.

To be a developed nation by 2020, we need active seniors who can contribute to the nation but this is only possible if aged-friendly infrastructure is ready and the elderly are financially supported.

“In the UK, I saw seniors shopping for groceries, paying their own bills and eating out - which is rare here.

“In Malaysia, seniors are seen as ‘abandoned’ if they do these things themselves.

Friday, 24 July 2015

People hold placards during a rally against Japan's Prime Minister Shinzo Abe's administration and his security-related legislation in front of the parliament building in Tokyo July 15, 2015. [Photo/Agencies]

The Japanese Cabinet on Tuesday approved its annual defense white paper, in which it accuses China of raising regional tensions in the East China Sea and South China Sea. China's Ministry of Defense expressed strong dissatisfaction and opposition toward the 429-page document later the same day, saying it "tarnishes the image of China's military" and deliberately plays up the "China threat" theory. Comments:

By defaming China as a regional security threat in its defense white paper, the Japanese administration led by Prime Minister Shinzo Abe is clearly aiming to add necessity and legitimacy to the new security bills, which breach Japan's pacifist Constitution, and complicate Asia-Pacific security issues such as the South China Sea disputes. It will be unfortunate for both Japan and East Asia if Abe remains adamant on challenging China.

Xinhua News Agency, July 21

Japan's defense white paper for 2015 is not conducive to safeguarding peace and stability in East Asia. The so-called threat is not from China but Japan itself.

Two new implications in Japan's latest defense white paper should be noted. First, the document is in line with the new security bills that Abe is trying to muscle through, offering excuses for the country's overseas military deployment. Second, as a non-stakeholder in the South China Sea issues, Tokyo may propose to participate in the US patrols in the area to expand its regional presence, and, of course, conduct more overseas military operations. It is a dangerous move that other regional powers should pay close attention to.

Qian Feng, vice-president of Asia Times, July 22

In the past, Japan used to see the Soviet Union and the Democratic People's Republic of Korea as the top threats. Now China has become the No 1 "threat". Confronted with the "unexpected" opposition to his security bills in Japan, Abe has resorted to the defense white paper to defuse public rage and convince peace-loving Japanese that the bills' passage is necessary.

Ny Huang Dahui, director of the East Asia Research Center of Renmin University of China, July 21

Thursday, 23 July 2015

Sophisticated diplomacy needed to tackle challenges in South China Sea

Philippine President Benigno Aquino III will seek the congressional approval of the proposed national budget for 2016 next week. In the budget proposal, the defense budget is $552 million, less than one 200th of China's military spending for 2015. The size of the Philippine defense budget may surprise many Chinese.

The defense spending of Vietnam is much higher than that of the Philippines. It reached $4 billion in 2014, but is still incomparable to China's. The GDP of Vietnam is less than $200 billion, much less than that of China's Guangxi Zhuang Autonomous Region which borders Vietnam. This will definitely constrain its overall scale of defense budget.

Though judging from the military spending of the Philippines and Vietnam, we can perhaps understand that the two countries won't pose a serious military threat to China in the South China Sea. But they are very likely to make a fuss and lean to external actors to intrude China's sovereignty and interests in the South China Sea.

The Philippines, facing a China with expanding maritime strength, feels anxious. But it is still greedy in its territorial claims. It holds a complex and sensitive mentality toward China.

Propaganda that China bullies small South China Sea claimants can spread easily, especially when Washington and Tokyo meddle backstage. China needs to do a lot of work to convince people of historical facts such as the origin of the nine-dashed line and that China holds sovereignty over the Nansha Islands. However, it is much easier to frame China as attempting to exert "hegemony" in the South China Sea.

China has to deal with the Philippines and Vietnam with enough patience and at the same time respond to distorted interpretations from the US and Japan about China's reef-building. The troubles are mostly caused by Manila and Hanoi, while strategic pressure mainly comes from the US.

The US and Japan have teamed up with the Philippines. China is not only facing several vessels and coast guard ships of the Philippines. Rather, China has been striving to figure out how to deal with the above issues and its own stakes in such a complicated scenario.

Obviously, China does not want to bear such reputations as "bullying small countries" or "seeking hegemony in the South China Sea." An impression of a peacefully rising China fits the country's global strategy. But if the Philippines and Vietnam, instigated by the US and Japan, cause a nuisance and step over China's red line, China will not remain restrained.

The Philippines and Vietnam are well aware of this. With China's increasing capabilities in the South China Sea, they will behave more cautiously.

The rivalry in the South China Sea is a highly technical diplomatic game and strategic contest. The public opinion should lend support, and Chinese decision-makers must be specialized diplomatic and strategic institutions. The Chinese public needs to know the real pattern of strength in the South China Sea and acknowledge that China has ample room to maneuver over the Philippines and Vietnam.

The strategy of the Philippines is to whine to the world about China's "bullying" so as to hinder China's global strategy. Hence it has formed an accord with Washington and Tokyo.

China has succeeded in its land reclamation projects on the Nansha Islands. This is an outcome of China's diplomatic specialization. It is reasonable and legitimate. The US and the Philippines can do nothing about it despite voicing objections.

The South China Sea should be an area where Chinese society can find confidence after experiencing long-time sufferings and setbacks. A big country not only owns its strength, but also has a broad mindset and wisdom to count its losses and gains.

Daniel Russel’s S.China Sea remarks absurd

US Assistant Secretary of State Daniel Russel Tuesday criticized China's policy on the South China Sea in Washington. These comments may sound reasonable to nonprofessionals but are not even worth refuting by legal experts.

Russel claimed that China misunderstood US neutrality and stressed that Washington only maintains neutrality with regard to the competing claims in the area. But when it comes to "adhering to international law," the US will not be neutral and will "come down forcefully." The US backs the Philippines' lawsuit to the international maritime tribunal and said the arbitration will be binding for both China and the Philippines.

It is necessary for the US to elaborate what article of international law that China's land reclamation activities in the Nansha Islands have violated and what forceful coercion China's engineering ships have done to neighboring countries.

By claiming both China and the Philippines need to accept the decision of the arbitral tribunal, Russel has deliberately misguided public opinion. Despite joining the UN Convention on the Law of the Sea, China submitted a declaration in 2006, stating that China does not accept any of the procedures provided for in Section 2 of Part XV of the Convention with respect to all the categories of disputes referred to in Article 298 of the Convention, which includes territorial disputes. Thirty-six countries, including South Korea, have made similar statements.

It's perfectly legal for China not to accept the arbitral tribunal's decision; in fact, forcing China to accept or abide by the arbitration result is illegal. Russel claimed the South China Sea issue has caused serious conflict between China and the US. But it needs to be pointed out that the conflict is at China's door, which is 12 time zones away from Washington. The conflict is actually imposed by Washington on us.

There are numerous claimants to the Nansha Islands. It's impossible for China to give up its sovereign claim; however, it didn't attempt to militarily expel Manila and Hanoi from the islands they illegally occupy. The Philippines deliberately stranded an old navy ship in China's Ren'ai Reef in 1999. It initially pledged to salvage the ship, but later on rascally reneged on this by reinforcing the ship. China has exercised restraint over the years. But Washington openly supports Manila's occupation of Ren'ai Reef. Where is the justice?

Chinese people never actually bank on Washington's neutrality, which doesn't exist at all. The US's South China Sea strategy serves its geopolitical purpose. Through lending support to Manila and Hanoi, it can realize its rebalance to the Asia-Pacific. South China Sea claimants have maintained the peace despite conflicts. The future situation will depend on how Sino-US competition develops, especially what intentions the US has in the South China Sea. As long as Washington doesn't want the tension to escalate, there will be hope for peace.

Swift’s South China Sea flight can only fool Manila

During his visit to the Philippines Saturday, Scott Swift, newly appointed US commander of the Pacific Fleet, joined a surveillance mission on board a P-8A Poseidon plane to observe the aircraft's full range of capabilities in the South China Sea. The US Navy released photos of Swift taking a bird's eye view of the South China Sea, but did not mention if the aircraft had flown over disputed areas.

The Philippine side soon welcomed Swift's move, believing it was a gesture from its US ally to aid its claims to the disputed territories with China.

Swift must have felt that he was the overlord of the South China Sea, as he merely flew over the area but the flight got various interpretations from the Philippine side and regional observers. Washington is an external player that can only exert limited influence to strike a balance over the South China Sea issue. That the US could extend its authority by "inspecting" the South China Sea would only be the illusion of a small number of Americans and Filipinos.

We have noticed that the US Navy has kept much lower key than two months ago when it released details that its reconnaissance plane had approached the Chinese islands under construction. It is estimated that the US will not behave inappropriately in the South China Sea before the meeting of the US and Chinese heads of states in September. But in the long run, its competition with China in the area is unavoidable.

China is accustomed to the frequent petty actions of the US in the South China Sea and is getting itself ready for the troubles stirred up by the US there. China is also improving its abilities in coping with the issue as well.

Most observers hold that while the US wants to strengthen the allies' trust, it does not have the excuse and determination to square off with China. Hence the contradictory and chaotic messages it conveys. Most importantly, Washington does not admit the facts. China has exercised much restraint in the South China Sea and its land reclamation does not violate international law, leaving others no excuse to prevent the move. But the US puts on a posture of involvement while it can unlikely take any substantial action, putting itself in an awkward position.

Manila is even worse. How can it be possible that the Philippines' disputes with China are resolved by the US? Does Manila think that China would acknowledge its unreasonable territorial claims after Swift's flight or if the US sends more navy ships? It would be overly simplistic if Manila thinks this way.

Recently a fictional post circulating on Chinese social media reflects the mentality of the Chinese public that China will not start up conflicts with the Philippines. But if Manila oversteps the red line for any reason, Beijing will strike back regardless of Washington's attitude.

It is understandable that the US hopes to maintain its clout in the area and the Philippines wants to counter China by roping in the US. But they need to mind the boundaries. The Philippines needs to be cautious in the area, as China has been.

Tuesday, 21 July 2015

Investment-friendly: A file picture shows visitors at the recent Star Property Fair in Penang. Affin Hwang believes that property developers with land bank and established presence in Penang will benefit from rising property demand.

PETALING JAYA: An increasing population in Penang coupled withlong-term property demand will be supported by major projects driven by public-private partnerships (PPPs), according to Affin Hwang Capital Research.

Among the PPP projects, the largest being the RM27bil Penang Transport Master Plan (PTMP), could be awarded by September. Singapore’s Temasek Holdings also has a proposed joint venture with Penang Development Corp (PDC) to develop an RM11.3bil business process outsourcing centre and an international technology park.

The research house said in a report that its top stock picks for infrastructure and property exposure to Penang were Gamuda Bhd, IJM Corp Bhd, and Eastern & Oriental Bhd (E&O).

It said the Penang government had pushed for the economy to move up the value chain by encouraging knowledge-intensive and innovation-led manufacturing and services.

“Property development companies such as E&O, Eco World Development Group Bhd and Ewein Bhd are embarking on new large-scale mixed development projects in the state with total gross development value (GDV) of RM60bil,” it added.

E&O has the highest exposure to Penang with property development projects in the state comprising 77% of GDV totalling RM34bil.
The multi-billion ringgit PTMP has seen keen interest, with six consortiums submitting bids to be the project delivery partner (PDP) while Affin Hwang Capital understands that discussions for the joint venture with PDC were in the final stages.

“The joint development agreement is expected to be inked in July or August. Work on the BPO Prime is expected to start in the first quarter of 2016.” The entry of Temasek would also attract more Singapore companies and other foreign investors to Penang.

“We believe Gamuda will likely be appointed the PDP for the project. Also, being one of the largest contractors in Penang, IJM Corp is expected to win a substantial portion of construction work for the PTMP,” it said.

“The Penang government also managed to convince Hewlett-Packard to choose Penang as the location to set up its new RM1bil manufacturing facility instead of Iskandar Malaysia.”

The plant would produce high-speed inkjet printer heads for the global market.

A ready pool of skilled workers out of a total workforce of 797,700, developed infrastructure, established information technology eco-system, and consistent and investment-friendly state government policies could be the reasons why Penang continue to be attractive compared with Iskandar Malaysia.

“We believe property developers with land bank and established presence in Penang will benefit from rising property demand in the long run.

“Job creation from rising investments in industrial and service sectors should support population growth from organic expansion and inbound migration,” said Affin Hwang Capital Research.- The Star/Asian News Network

The housing market in Penang today

With an abundance of newly built high-rise condominiums, is Penang facing a property glut?

Malaysia’s population crossed the 30 million mark in February 2014. According to the Population and Housing Census 2010, about three in 10 people fall in the 20-40 years old age group – the one most likely to be firsttime home buyers. By 2020, that group is projected to grow to 11.3 million. In Penang, the current estimate for this age group is at 0.6 million, or 36% of the state population. The average property price in Penang currently stands at RM336,521. Even with the 50% stamp duty cut, middle-income earners with two dependents can only afford houses priced at RM300,000 and below [1], and looking at the current national average price for all types of properties, RM300,000 is well below the average (Figure 1).

Besides increasing prices, public concern is on whether or not the property market is overheated; many suspect that currently there is an oversupply of properties, especially in Penang. The current existing stock of residential properties can house more than six people per household (Table 1), and as smaller households are the global trend for developed and developing countries, statistics indicate that there is still a growing demand for housing.

To meet market demands and expectations, a steady addition of incoming and planned supply to the existing property stock in Penang is still expected in the near future. Based on the population projection given by the Department of Statistics for Penang (1.75 million in year 2020), Malaysia Property Incorporated found that there is an oversupply of about 45,000 units this year and 22,000 units by 2020 [2], assuming that the average household size stays at 3.98 people and housing supply stops after 2015.

A growing demand for housing with a potential oversupply of properties sounds contradictory enough, begging the question: will the potential glut be for a certain type of residential property, and are the right kinds of properties being built in the right areas?

Whither the low-medium cost housing?

On Penang Island, the most densely populated district is in the north-east; the area encompassing George Town, Jelutong, Air Itam, Gelugor, Tanjung Tokong and Tanjung Bungah still remains one of the most sought-after places for property. Despite limited land spaces, incoming and planned unit supply to this district has seen no sign of abating.

However, in recent years, the south-west of the island, where the airport and the industrial area are located, has become the hottest investment spot for bigname developers. The highest growth of property supply on the island is expected to be in this area, with the likely addition of 17,518 incoming units (33.3%) and 17,058 planned units (32.4%).

On the mainland, the more populated central Seberang Perai (SP) is
expected to see more new housing units in coming years, compared to
north and south SP. The opening of the Second Penang Bridge and the
announcement of a series of development projects in Batu Kawan,
including IKEA and branch campuses of University of Hull and KDU
University College, certainly give south SP a huge appeal for future
housing development. So far, the housing demand there has not
jumped markedly. However, as a prelude, following the announcement of
the
projects, land prices in south SP skyrocketed to between RM50 and
RM60 per sqft, compared to previous prices of RM8 to RM9 per sqft
[3].

Within the high-rise category, there is a trend of developers
preferring to build higher value condominiums (Table 3). In coming
years,
especially on Penang Island, a higher proportion of new highrise
units will come from condominiums. Although the construction of low
cost flats is emphasised by both the federal government and the
Penang state government, the supply of such units is slow and short in
coming – at just half the number of the future supply for
condominiums. The future supply of medium cost flats also cannot catch
up with
the supply rate and units of condominium, indicating that
condominium sales seem more profitable for developers and that there may
be an
oversupply of higher value high-rise units in the near future.

Probably as the result of an influx of affluent local or foreign
buyers, the supply for bungalows (detached) units has increased
significantly. Service apartments have also become a new niche in
the property market; the number of service apartment units is expected
to double.

The island factor
Penang Island’s attractiveness as a place to invest or settle in
can be seen from its property prices; one condominium unit on the
island normally costs more than twice or thrice that on the
mainland. The same goes for the price of landed properties (Table 3).

Although this tendency is likely to persist for some time, the
number of residential property transactions slowed down on the island
for
the first three quarters of last year whereas property sales in SP
were generally unaffected (Table 4). Due to market-cooling measures
– i.e. the introduction of more stringent real property gains tax
(RPGT) and maximum loan-to-value ratio for individual and
non-individual borrowers – laid by the federal government and Bank
Negara to curb property speculating, the upward price index trend for
both landed properties and high-rise units slowed down
significantly for the first half of 2014. Given that the number of sales
was also
at a lower level in the third quarter compared to the previous
year, property prices on the island for the latter half of 2014 were
probably stagnant.

Source: Residential Property Stock Table Q2 2014, NAPIC.

With the implementation of the goods and services tax (GST) on
April 1, firsttime home buyers may rush to make property purchases in
the first quarter of 2015 to avoid paying the incremental cost.
Although residential properties fall under the “Exempt Rated” basket of
goods, property prices look set to increase due to the inflation
cost of construction materials. According to a market survey,
developers are facing ever higher compliance costs. Therefore, it
is unlikely that house prices will drop this year when higher
inflation is expected. Meanwhile, the “Youth Housing Scheme”
announced in Budget 2015 may encourage young families from lower and
middle income groups to make their first home purchase. Under the
scheme, those who qualify and are selected will be given RM200 monthly
financial assistance by the federal government to pay the loan
instalments, 50% stamp duty exemption on loan and transfer agreements as
well as 100% loan financing.

Source: Residential Property Stock Table Q2 2014, NAPIC.

Old is gold
Interest from investors in George Town’s pre-war heritage
properties has never been greater since the city was inscribed as a
Unesco
World Heritage Site in 2008. Under the draft of the George Town
Special Area Plan, there is a total of 4,665 buildings located within
the core (50.2%) and buffer (49.8%) zones. Given the immense
potential for capital appreciation or gain from investments, these
heritage
properties are in red-hot demand. With the booming tourism in
George Town, many investors have transformed old, neglected heritage
shop
houses into boutique hotels or commercial premises.

Before the repeal of the Rent Control Act in 1999, there were very
few transactions and the price index did not move much for properties
situated within the conservation zones. Since then, the compound
annual growth rate for such properties from 1999 to 2013 was at 12.7%
[4]. For the first half of last year, the average price for pre-war properties in George Town registered a new highest record at
RM1,300 per sqft.

Source: Henry Butcher Malaysia (Penang) and NAPIC.

Similarly, the number of pre-war property transactions also soared
especially after 2008 (Figure 2). However, despite the new highest
record of average transaction price, there were fewer property
transactions last year; the Penang Real Estate Market Research Report
on pre-war properties published by Henry Butcher Malaysia (Penang) [5]
suggests that the prewar heritage property market has more
buyers than it has sellers due to a limited supply of good
listings. Because of this, the pre-war property market price could be
very
much distorted. For example, in March 2012, a 2,000sqft shop house
along Lebuh Pantai (considered a prime heritage area) was sold at
RM4mil (or RM2,000 per sqft) [6] – an isolated case but way above the average market price nonetheless.

Since the number of pre-war heritage buildings in the historic
George Town is fixed and more than a thousand of such properties were
transacted since 2008, the proportion of “sellable” properties in
the market will shrink by year while market demand for such properties
remains high. Hence, it is reasonably expected to see even steeper
transaction prices and fewer transacted pre-war property units in
years to come.

By Lim Chee Han
Lim Chee Han received his PhD in Infection Biology from
Hannover Medical School, Germany. He is a senior analyst in the
economics section of Penang Institute.